LONDON -- Stock markets traded cautiously on Wednesday ahead of a U.S. vote on raising the nation's borrowing limit temporarily.
The House is set to vote on a motion to increase the nation's $16.4 trillion borrowing ceiling for three months. Without congressional action, the Treasury sometime in late February or early March will not have enough money to pay all of its obligations, raising the risk of a first-ever default on the government's debts.
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Analysts said markets have room for gains if U.S. lawmakers approve the ceiling increase, but warned that longer-term negotiations on the budget will be tough and may weigh on sentiment again.
"A vote is expected today, and if it is passed as expected it should clear the very short term obstacles for risk appetite, although battles on automatic spending cuts and the budget itself are not so long away," said analysts at Credit Agricole CIB in a market commentary.
By late morning in Europe, stock indexes were lacking momentum. Britain's FTSE 100 was up 0.2 percent at 6,189.55 while Germany's DAX rose 0.3 percent to 7,719.21. France's CAC-40 lost 0.1 percent to 3,737.18.
Corporate earnings in Europe showed a mixed outlook. Consumer goods maker Unilever and pharmaceuticals company Novartis reported good gains, but industrial conglomerate Siemens and software maker SAP saw their earnings drop.
Wall Street, meanwhile, was headed for a weak open. Dow Jones industrial futures were flat at 13,696 while S&P 500 futures were 0.1 percent lower at 1,488.10.
Strong earnings reports from big companies such as Google, IBM and DuPont had helped push the Dow to its eighth gain in nine sessions on Tuesday. The rise came despite a report showing sales of previously occupied homes dipped in December from November. The news wasn't as bad as it looked, however. Sales rose last year to 4.65 million, a 9.2 percent increase from the previous year and the most in five years.
Earlier in Asia, Japanese stocks reacted negatively for a second day to the central bank's plans for shoring up the economy.
The Nikkei 225 in Tokyo tumbled 2.1 percent to close at 10,486.99, a day after the Bank of Japan set its target inflation rate at 2 percent and said it would undertake open-ended asset purchases starting in 2014. Some analysts said investors were disappointed that the central bank didn't take more aggressive measures.
Francis Lun, managing director of Lyncean Holdings in Hong Kong, said the Bank of Japan's latest efforts won't reverse two decades of stagnant growth without addressing the country's budget deficit and public debt, which ballooned under years of efforts to stimulate the economy.
"They are not doing anything to address the problem. They are just using the same old methods, of printing money to sustain economic growth. If you use that too often, it will lose its efficacy," Lun said.
South Korea's Kospi shed 0.8 percent to 1,980.41. Hong Kong's Hang Seng fell 0.1 percent to 23,635.10. Australia's S&P/ASX 200 bucked the trend, rising 0.2 percent to 4,787.80.
Elsewhere, the benchmark oil contract for March delivery was down 6 cents to $96.62 per barrel in electronic trading on the New York Mercantile Exchange. The February contract, which expired Tuesday, rose 68 cents to close at $96.24 a barrel on the Nymex on Tuesday.
In currencies, the euro rose to $1.3329 from $1.3317 in New York on Tuesday. The dollar fell to 88.31 yen from 88.76 yen.